2013 (10) TMI 103 - AT - Income Tax

Tax Appeal Success: Penalty Set Aside, Relief Granted for Destroyed Books

The Tribunal allowed the appeal, set aside the penalty, vacated the order of the Commissioner (Appeals), and granted relief to the appellant. The penalty ... Penalty u/s 271(1)(c) of the Income Tax Act - Addition in respect of benami accounts itself is deleted, the expenses incurred are disallowed primarily for the reasons that expenses incurred through these expenses could only be bogus account – Held that:- In penalty proceedings, an explanation of the assessee is not required to be substantiated to the hilt and all that is to be examined whether the explanation is bona fide, reasonable and can indeed stand the test of preponderance of probabilities - In the given situation and particularly as the addition for benami accounts stands deleted and there is no dispute about the facts that the accounts were duly audited and pertain to a much earlier year, it is not a fit case for levy of penalty. The assessee's claim is of the books of accounts having been destroyed in a natural calamity may not have been accepted in the quantum assessment proceedings – Penalty deleted – Decided in favor of Assessee. Issues:1. Correctness of order regarding penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1999-2000.2. Confirmation of penalty for alleged income from benami accounts and alleged bogus expenses.Analysis:Issue 1:The appellant challenged the order of the learned Commissioner (Appeals) regarding the penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1999-2000. The appellant raised grievances related to the addition of Rs 10,91,580 on account of alleged income from benami accounts and Rs 4,14,982 on the grounds of alleged bogus expenses. The Tribunal considered the quantum addition of Rs 4,14,982, which was deleted in the quantum proceedings, leading to the foundation for the penalty ceasing to exist. Consequently, the penalty for this amount was also deleted.Issue 2:Regarding the addition of Rs 10,91,580, the appellant derived income from trading in iron and steel and was a director in a cooperative bank. The Assessing Officer alleged that the appellant had opened fictitious accounts in the bank, which were linked to certain expenses claimed to have been incurred through these accounts. The Tribunal found that the revenue failed to prove that the persons were benamis of the assessee. Although the Tribunal confirmed the disallowance of expenses due to lack of evidence from the appellant, it was noted that the onus to prove the benami accounts was on the revenue. The Tribunal emphasized that in penalty proceedings, the explanation of the assessee need not be substantiated fully but must be bona fide and reasonable. Considering the circumstances, the Tribunal concluded that it was not a suitable case for imposing a penalty. The penalty was deleted based on the lack of legal scrutiny and the appellant's claim of books being destroyed in a natural calamity.In conclusion, the Tribunal allowed the appeal, set aside the penalty, vacated the order of the Commissioner (Appeals), and granted relief to the appellant. The judgment was pronounced on June 28, 2013, by Pramod Kumar.